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Trusts and Estates Law and Tax Journal: March 2013

Tax collection is not a moral crusade but the enforcement of black letter law, argues Geoffrey Shindler

The next time you are driving in excess of the speed limit, and admit it we all do from time to time, the speed limit being so unreasonably low, beware the flashing sirens and ear-splitting noise of the car behind you. But, equally, be aware that it may not be, as it always has been ever since the dawn of time, the police, the fire service or an ambulance. No, there is now someone else who wishes to join that holy trinity of those entitled to break the speed limit so that they can bring criminals to book more quickly. Believe it or not, the Department of Transport has been approached by Her Majesty’s Revenue & Customs with an application that they, too, can break the speed limit that applies to the rest of us in the pursuit of tax evaders. (How were those skills acquired? Paid for by the new employer? If so, is the cost taxable as a benefit in kind? But I digress).

Nicholas Holland and James Ratcliffe consider whether there are grounds to bring claims for investment losses after the Court of Appeal’s decision in Rubenstein

In the wake of the global financial crisis, people expected a massive surge in litigation by investors looking for someone to blame for their losses. That surge never happened. Why not? There were many reasons why the anticipated glut of litigation in the years after 2008 did not take place. Of these, we intend to focus in this article on two jurisprudential reasons for the relatively small amount of litigation in this field. One is the concept of contractual estoppel, which has unique repercussions for trustees. The other is the decision of the High Court in the case of Rubenstein v HSBC Bank Plc [2011], now overturned. The reversal of that first instance decision by the Court of Appeal potentially opens up a finite window for claims based upon losses relating to the global financial crisis. Given that these claims are likely to date back to 2008, or even 2007, limitation periods may be well advanced and urgent action needed (see box on p5).

Neasa Coen explains the impact of a new definition of charity on tax reliefs

The Finance Act 2010 saw the introduction of a new definition of ‘charity’ for tax purposes. This article explores the background to the introduction of the new definition and its impact on charities and philanthropists.

Withers LLP

Prest shows that family judges must uphold company law when considering what constitutes the matrimonial pot, as James Copson discusses

In October 2012 the English Court of Appeal produced a landmark ruling in the case of Petrodel Resources Ltd v Prest [2012]. This decision overturned almost 30 years of practice in English family courts in which they had made orders against the assets of companies considered to be the alter ego of one spouse in satisfaction of the claims of the other spouse (after obiter comments made by the Court of Appeal in the case of Nicholas v Nicholas [1984]).

Sofie Hoffman and Sharon Kenchington examine the lessons from Hughes v Bourne on applying for the court’s blessing

The ability of trustees to apply to the court to give directions to bless an important decision they wish to take provides a trustee – who has acted reasonably – with protection against any future claim by beneficiaries who are opposed to that decision. Such applications for directions are not ‘Beddoe applications’, by which trustees specifically seek to protect themselves from costs incurred in certain types of litigation involving the trust, although the conduct of both types of application is governed by Part 64 CPR and its practice direction. Even where trustees are asking the court to bless their proposed course of action, their duty to act reasonably prevails and their conduct in bringing such an application may have a bearing on costs if matters do not proceed as anticipated. The majority of these decisions are not reported because Part 64 provides that in the first instance they will be listed in private and most are relatively straightforward. However, what is clear from the cases that have been reported is that obtaining the sanction of the court is not a foregone conclusion in every case.

Vicki Bowles sets out the implications of Charity Commission v RNIB on payments to trustees

The most controversial recommendation in Lord Hodgson’s review of the Charities Act 2006 turned out to be a suggestion that charities with an income of over £1m should be automatically given a right to pay trustees for being trustees. The government have since said that they will not support this recommendation, but it certainly got the sector thinking about trustee payments, and opinions were clearly divided! Although the basic principle has always been that charity trustees should not benefit from their position as trustee, placing volunteering at the very heart of the charitable sector, there has always been the possibility of paying trustees for being trustees in certain circumstances. Charity Commission v RNIB [2012] looks at the process of getting permission from the Commission, and shows that it is not only possible to get permission for a one-off payment for a particular duty or period of time, but that the power to pay can be added to governing documents (albeit still subject to obtaining Commission consent), where the right circumstances exist. The case also illustrates that when charities are dealing with the Commission, it is important to provide as much relevant information as possible.

David Wilson and Julie Wynne analyse Swiss divorce case Rybolovlev v Rybolovlev, which has implications for assets held abroad

On 26 April 2012, the Swiss Federal Supreme Court rendered a decision on trusts and matrimonial property regime, Rybolovlev v Rybolovlev. In summary, it held that assets settled by one Swiss-resident spouse into trust to place them beyond the other spouse’s reach could be attached in the scope of a Swiss divorce to guarantee the former spouse’s share in the marital property and that Swiss courts had jurisdiction to order interim measures over assets held abroad.

Julia Rangecroft concludes her two-part series on the best approach to deathbed planning

The first article in this series, ‘Conserving family wealth’, TELTJ143, January/February 2013, p25, looked at some of the practical steps to consider upon the scenario of deathbed planning. The steps included looking at annual exemptions and small gifts, normal expenditure out of income, gifts for maintenance of the family and maximising reliefs. This article will look at other IHT mitigation measures: spouse/civil partner exemption and use of the nil-rate band; and death in service, pensions, critical illness and life insurance provisions. A reminder of the complete checklist to be considered is set out on p28.